Recently, a friend expressed his frustration with the Justice for Survivors Act signed in the California legislature in 2023. This Act ends the civil statute of limitations for minors who have experienced sexual abuse. While my friend vehemently agrees that abusers ought to get their reckoning, he took issue with the preponderance of claims related to clergy who were long deceased. The result of this preponderance is the necessity for several dioceses in California to file for bankruptcy, while more teeter on financial turmoil. In his mind, why should the Archdiocese of Los Angeles be under financial strain due to the actions of priests who passed away decades ago?
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My friend posed an interesting topic for me to reflect on. Being a financial professional who has worked in distressed debt and turnarounds, I am familiar with corporate bankruptcies—both with companies that failed and those that exited. Additionally, I considered the spiritual implications of bankruptcy. Taking both of these perspectives, I believe that a bankrupt diocese serves a proper purpose. As Catholics, we should demand that our leaders accept the necessary penances for their past sins—even if it leads to utter financial failure.
Bankruptcy from a Corporate Perspective
Companies never form with the intent to become bankrupt; rather for-profit entities generally have the singular aim to maximize profit and to grow this benchmark annually. Businesses that fail do so for a variety of factors, including product/service obsolescence, competition, a rise in the cost of the supplies, or a change in consumer preferences. Brick-and-mortar retailers feel this pressure, along with long-held companies that needed to innovate, such as the newspaper industry.
Businesses generally do not fail overnight. The cracks in the foundation are often years in the making. Lehman Brothers is an example of a failure due to years of improper risk management and the pursuit of greed without appreciating the potential for loss. Business leaders generally have the opportunity to pivot and navigate during financial difficulty. Sometimes the decisions lead to closing locations, layoffs, and focusing on more profitable revenue segments. These changes can occur long before a company heads to bankruptcy.
While closures and layoffs are unfortunate, and directly impact families and communities, the fault lies with the business leaders and their inability to perform. Bankruptcy is simply the remedy for a company to completely exit or to more formally restructure their obligations and shift in a more profitable direction.
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The bankruptcy of dioceses also does not happen overnight. Declining parish and school attendance certainly are factors, along with rising costs, but the magnitude of legal expenses and settlement payouts can decimate the viability of a diocese. Just like businesses, Church leaders must take accountability for their decisions that resulted in their financial distress. Inadequate consequences for abusive priests, moving said priests to new parishes only for them to continue their predatory behavior, and offering no recourse to the victims early on set the dioceses up for failure.
Regardless if the priests named in these lawsuits died decades ago, it does not excuse the fact that the dioceses, as the surviving entity and ultimately responsible for the behavior of these deceased clergy, need to practice what they preach and accept the penance due to them. If legal settlements impair a diocese’s ability to continue, then it simply should not continue. The diocese should accept its bankruptcy and cease completely.
This is how an investment banker might view the financial peril of these Church entities, and there is not much ambiguity to offer here. Reviewing this from a spiritual standpoint not only agrees with the financial perspective but suggests the implications are far more severe.
